A couple of reactions to today's foreign currency report ...
1) While all the attention is on China, the failure to expand the report's coverage is notable. In my view, both Thailand and Vietnam could have been named.
home.treasury.gov/system/files/2…
1) While all the attention is on China, the failure to expand the report's coverage is notable. In my view, both Thailand and Vietnam could have been named.
home.treasury.gov/system/files/2…
2) This most signficant language in the report may be the new (I think) emphasis on symetrical patterns of intervention, and specifically resisting depreciation pressure as strongly as resisting appreciation pressure. 
3) Think the administration is moving toward an argument that China's failure to resist depreciation pressure with sufficient force is a concern (given how strongly it resisted appreciation pressure in the past).
4) The key language on China is my view is the following:
"it is clear that China is not resisting depreciation through intervention as it had in the recent past."
That sounds like a complaint that China isn't managing its currency strongly enough ...
"it is clear that China is not resisting depreciation through intervention as it had in the recent past."
That sounds like a complaint that China isn't managing its currency strongly enough ...
5) Deep in the report there is also this observation (complaint?):
"Treasury staff estimate China’s direct intervention in the foreign exchange market to have been limited this year, including in recent months when the RMB was depreciating"
"Treasury staff estimate China’s direct intervention in the foreign exchange market to have been limited this year, including in recent months when the RMB was depreciating"
6) Kind of surprised that the Treasury didn't firmly commit to making the USMCA fx intervention disclosure standard a feature of all new trade agreements:
"We will consider adding similar concepts to future U.S. trade agreements, as appropriate. "
Pretty weak language (imo)
"We will consider adding similar concepts to future U.S. trade agreements, as appropriate. "
Pretty weak language (imo)
7) the new NAFTA standard is only a disclosure standard: the central requirement is the disclosure of intervention data monthly with a week lag. It wouldn't be impossible to make that standard the new normal.
8) And if the Treasury ever applied its new standard for China -- symmetry in intervention and resisting downward pressure as firmly upward pressure - to Taiwan, well, there is a good case for naming Taiwan now ...
9) The absence of any serious analysis of an economy with a 15% of GDP current account surplus is notable, especially as Taiwan's standard for disclosure of its true reserves and actual intervention is below that of China.
That's all I have, for now ...
